The impact of smart building technology on property value

As commercial real estate markets weather the stress of hybrid working arrangements and looming Net Zero targets, smart building technology has emerged as a significant factor in enhancing property value. According to a Fortune Business Insights report, the global smart building market is projected to grow from US$117.4 billion in 2024 to US$568 billion by 2032. 

This transformation is driven by a variety of trends, including rapid urbanisation and increasing pressure from regulators to reduce carbon emissions. In this article, we’ll explore how and why smart building technologies are making commercial properties more valuable, both now and in the future. 

Enhanced energy efficiency

Smart building technology is helping commercial buildings consume energy efficiently—a particularly important value driver at a time when energy costs are outpacing inflation. 

By using Internet of Things (IoT) sensors and automated systems, buildings can optimise energy consumption by adjusting HVAC and lighting levels based on real-time occupancy and tenant usage patterns. Smart building systems can save 20-25% of energy consumed by HVAC systems alone by using technology to control, monitor, and optimise those systems. 

Building analytics tools like CIM’s PEAK Platform also significantly reduce wastage by identifying signals of overuse (such as equipment remaining in operation overnight) or disrepair (such as equipment leaks or other malfunctions that impact performance). 

At one Grade A office asset in Glasgow, PEAK identified overnight operation of a number of WC extract fans and fan coil units (FCUs). Alerted to the issue, the site’s Facilities Manager discovered that several time zones had not been correctly set in the building’s BMS. The FM corrected the issue and overall energy usage dropped by more than 33%, all thanks to one seemingly simple alert. 

Improved tenant comfort and satisfaction

Smart buildings enhance the overall health and comfort of occupants by maintaining optimal lighting, temperature, and air quality. Tenants are often attracted to the convenience of advanced building amenities like smart parking, touchless entry systems, and personalised controls. 

With a market poised to experience a reset in commercial property values, tenant satisfaction matters more than ever. Occupant comfort and satisfaction are generally viewed as leading metrics for lease renewals, directly contributing to building occupancy, NOI, and overall asset value. Knight Frank’s Head of Asset Management Services, Lisa Atkins, observed in a CIM webinar on tenant satisfaction that satisfaction “is the best lead indicator of future [asset] performance.” 

And the increase in comfort doesn’t have to be dramatic to make a difference. An MIT and Maastricht University study led by GRESB co-founder Dr. Nils Kok found that tenants are 18% less likely to leave and 8% more likely to renew with just a 1-point increase in satisfaction. 

Predictive maintenance and operational efficiency

IoT sensors in smart buildings continuously monitor the condition of critical systems such as HVAC units and elevators. Constant monitoring makes predictive maintenance possible, allowing building managers to address issues before they escalate into costly repairs. Rather than wasting time, energy, and capital on schedule-based maintenance tasks that may not be necessary, predictive maintenance lets the equipment tell the story.

Predictive maintenance reduces downtime and extends the lifespan of building systems, further reducing operating costs and enhancing property value. By leveraging existing plant and equipment data, building owners can make better decisions, improve planning capacity, and increase profits.

Enhanced security features

Surveillance cameras, access control, and biometric security systems are increasingly a requirement in modern commercial spaces. These features provide tenants with improved security while increasing the property’s appeal, freeing owners to charge higher rents. 

Building analytics tools like PEAK also contribute to building safety by detecting and alerting occupants to potential hazards such as dangerous levels of unhealthy gases in the indoor environment. At one property in Brisbane, PEAK detected CO2 levels that were outside safety thresholds, alerting the Operations Manager and enabling intervention before tenant wellbeing was impacted. 

PEAK also alerts property managers to other hazards, such as water leaks, that could result in property damage or loss. By incorporating proactive, safety-oriented technology into a building’s operational workflows, asset owners can ensure longevity and increase value.

Increased marketability

Buildings equipped with energy-efficient systems, smart amenities, and advanced security are more attractive to both tenants and investors—an appeal that translates into higher rental rates and sale prices. Properties with smart features are also better positioned to obtain green certifications like LEED or high NABERS ratings, further enhancing their marketability. 

Using PEAK, Kyko Group achieved a 5.5-star NABERS rating and an investment payback of six months at a prime boutique commercial office building in Sydney, all with an average 89% thermal comfort rating. In London, buildings with a green certification command a 20% higher rate than their “brown” counterparts. 

Sustainability and environmental impact

Smart buildings also play a pivotal role in promoting sustainability. If we are to achieve Net Zero by 2030, the built environment must be an active participant. By reducing energy consumption and optimising resource use, commercial buildings contribute to a lower carbon footprint, aligning with global sustainability goals.

The eco-friendly approach made possible by smart building technology not only attracts eco-conscious tenants; it also opens doors to tax incentives and grants while protecting properties from regulatory backlash, further enhancing property value.

Conclusion

The adoption of smart building technology is a wise investment for property owners and REITs aiming to enhance the value of their commercial assets. As the market continues to prioritise sustainability and efficiency, properties equipped with these advanced technologies will likely see continued appreciation in value. Investing in smart building technologies is therefore a strategic way to future-proof assets in an increasingly competitive market. 

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